Let’s pick up where we left off a couple of weeks ago! In today’s Part 2, we’ll dive into some of the individual names I like the most in the Canadian cannabis industry and why.
I must admit that I haven't done extensive research into this. The one I'm most familiar with is the AdvisorShares Pure Cannabis ETF (YOLO). It's a global cannabis ETF (56% Canada, 42% US, 2% ROW). The only company I highlighted in this post that is included in this ETF is Rubicon Organics, with a 1.3% weight. I personally think cannabis is a stock picker's market with only a handful of investable companies, so I definitely wouldn't want to own the entire space.
Nice article. At first I thought the capacity expansion at LOVE and ROMJ would bring added risk, but the amounts required relateive to the cash they generate is low. And LOVE has a long and gradual expansion plan that can be modified at any point, which I think de-risks it.
Thanks! ROMJ's expansion carries a little bit more risk since it's a new facility that they haven't operated before. That's why management has been careful in setting the right expectations for a 6-9 month ramp-up in cultivation.
In LOVE's case, it's basically just copying and pasting the first 12 grow rooms from one side of the building to the other. The 12 additional grow rooms are built out already. All they need is to add about $1M worth of equipment per room. The largest piece of the expansion project is building out the new post-harvest processing center in Valleyfield to accommodate double the volume of biomass (the cost should be ~$10M).
I agree with your assessment that the cash requirements are manageable considering the company's current FCF generation.
Excellent post. Very useful analysis and commentary. I am definitely interested in your notes on your watchlist too. Many thanks.
Damn well written and researched. Cannara seems like it has a lot going for it; had no clue Quebec had the lowest electricity rates.
Thanks for laying out all your points/catylysts in such an easy-to-read way. Appreciate all the hard work and information, Mathieu.
Yes, we have abundant (and cheap) hydroelectricity in Quebec, which is a big advantage. I'm glad that this piece was helpful!
Really? Cause Ontario electricity rates just went up 29%....
Wow that's quite the increase... I'm not aware of any recent increase here. Quebec has so much hydropower that we export it to the US, actually.
Yup, I think most of ours comes from nuclear power, which I believe is run by Mr. Burns.
Yes to a part 3! Ones to watch…
Great work, thank you for letting us piggyback on your industry immersion.
My pleasure!
What about cannabis ETF's?
I must admit that I haven't done extensive research into this. The one I'm most familiar with is the AdvisorShares Pure Cannabis ETF (YOLO). It's a global cannabis ETF (56% Canada, 42% US, 2% ROW). The only company I highlighted in this post that is included in this ETF is Rubicon Organics, with a 1.3% weight. I personally think cannabis is a stock picker's market with only a handful of investable companies, so I definitely wouldn't want to own the entire space.
Nice article. At first I thought the capacity expansion at LOVE and ROMJ would bring added risk, but the amounts required relateive to the cash they generate is low. And LOVE has a long and gradual expansion plan that can be modified at any point, which I think de-risks it.
Thanks! ROMJ's expansion carries a little bit more risk since it's a new facility that they haven't operated before. That's why management has been careful in setting the right expectations for a 6-9 month ramp-up in cultivation.
In LOVE's case, it's basically just copying and pasting the first 12 grow rooms from one side of the building to the other. The 12 additional grow rooms are built out already. All they need is to add about $1M worth of equipment per room. The largest piece of the expansion project is building out the new post-harvest processing center in Valleyfield to accommodate double the volume of biomass (the cost should be ~$10M).
I agree with your assessment that the cash requirements are manageable considering the company's current FCF generation.
I have been following Avant Brands (AVNT) for a while now, it could potentially be in a future tiny-underdog or to-watch list
Yeah it's one I've also been following. However, I'm worried that they rely too much on international markets vs their domestic business.